Business Directories

Tullow to drill 49 oil wells this year

London, January 12, 2013

Tullow Oil, one of Europe's largest oil and gas exploration and production companies, has a record 49 wells planned this year, and drilling engineers due to deliver news by February are under pressure after a disappointing trading update from the Africa-focused company.

After a mixed year for one of the industry's best performing drillers of recent times, Tullow's output guidance for 2013 at 86,000-92,000 barrels of oil equivalent per day (boepd) came in below some analysts' forecasts, and its 2012 output at 79,200 boepd undershot company guidance.

In addition, parts of the update on drilling in Uganda and Kenya were more cautious than some analysts had hoped from Europe's largest oil and gas exploration and production company outside the industry's integrated giants.

But finance director Ian Springett said the company's view of its east African assets was unchanged and stressed that exploration, not production, remained Tullow's driving force, with a record 49 wells to be drilled during the year.

He said the negative Ugandan well results were establishing the margins of the basin and were relatively low cost, while in Kenya "it's very, very early days".

"We need to drill a lot more wells in Kenya before we really understand where are the best locations and what the flow rates are," he said.

"We have a very large exploration programme active in a number of countries with some basin opening potential in a number of them. It's a big and wide programme."

The company said it would continue to focus on "high value oil and early monetisation" in its exploration-led growth strategy - selling assets where it has found oil relatively early in the development and production process.

Some investors have begun to worry it is losing that focus, especially since December last year when it bought Norwegian driller Spring Energy, and participants at a Macquarie investment conference this week expressed a desire to see it maintained.

Out of the more than 30 who responded, 65 per cent said Tullow should avoid getting sucked into a production target structure, and err on the side of early sell-out.-Reuters